Montreal millionaire can still hold diamond but faces U.S. arrest warrant

The cross-border court fight between multimillionaire Georges Marciano and a group of ex-employees trying to collect on a $260-million damages award they obtained against him in California is far from over.

Today, the Quebec Court of Appeal ruled against a second motion by the California litigants for a 84.37-carat white diamond and a collection of Rolex watches – together worth more than $20 million – be held in safekeeping while the high court rules on the validity of a massive seizure of Marciano assets in Montreal to conform to a California court order.

The litigants, unable to collect on the damages award in California were able to obtain a subsequent related bankruptcy court order against Marciano that they are seeking to enforce in Canada.

In late December, Superior Court Justice Mark Schrager – partly on grounds that the U.S. bankruptcy proceedings are still under appeal — overturned a secret seizure order Quebec Superior Court Justice Chantal Corriveau had approved three months before in September.

That seizure resulted in the freezing of an 18-building portfolio of real estate in Old Montreal held by a Marciano family trust and the carrying away by bailiffs of millions of dollars worth of art and other valuables owned by Marciano.

Today’s court ruling by the Quebec Court of Appeal confirmed that because Schrager’s order that all seized assets be returned to Marciano was executory, with costs, notwithstanding any appeal, the California litigants must wait until the Quebec Court of Appeal decides on the merits of any seizure of Canadian assets stemming from the U.S. bankrupty proceedings after hearings in late March.

Warrant Issued

Meanwhile, the California litigants have managed to turn up the heat on Marciano in another big way to try and collect on their California court award for defamation and emotional stress in California

On Jan. 15 they obtained a warrant for Marciano’s arrest from a U.S. bankruptcy judge for civil contempt, a judgment that can only be purged if Marciano hands over the diamonds and other assets.

That warrant is certainly enforceable if Marciano enters the U.S., but would ostensibly need some kind of Canadian court approval to be valid in Canada. Marciano, one of the founders and owners of the international Guess Jeans brand, moved to Montreal to begin a new life with Montrealer Sasha Rohmer after a visit to the city in 2006.

Today’s ruling was also a blow to PricewaterhouseCoopers (PwC) Inc., which had obtained initial recognition as interim receiver to oversee Marciano’s seized assets in Canada as part of the initial seizure order. It had asked the appeal court to allow it to keep some of the funds seized from Marciano to pay for its fees and expenses pending the high court’s decision on the seizure of Marciano’s assets. The court turned down the request, noting that it would hardly be fair to use money from the person (Marciano) they were seeking to collect from, especially given that their status is not currently recognized by the court because of Schrager’s retroactive judgement.

It cost up to $1 million to return Marciano’s assets after the seizure was overturned and Marciano is separately seeking damages as a result and still involved in a tangle of other proceedings. Those include a contempt order filed against David Gottleib, the California-based trustee for the U.S. bankruptcy proceedings. Despite an order to return all seized personal documents (or copies of them ) relating to Marciano’s business affairs along with seized assets, lawyers for the litigants and the receiver entered copies of some documents in a sealed box before the California bankruptcy court, an action are arguing was legally justified.

Proceedings on that issue continue this month, while the Quebec Court of Appeal has agreed to hear the merits of an appeal on Schrager’s decision not to uphold the seizure of Marciano’s assets or recognize the U.S. bankruptcy judgment against him in late March.

Lawyers from at least four Montreal law firms have been working on the complicated file.

Bernard Boucher and Patrick Kergin of Blake Cassels & Graydon LLP are representing the California litigants and U.S. trustee Gottleib.

Osler, Hoskin & Harcourt LLP is acting for PwC with a team that includes Martin Desrosiers, Érik Préfontaine and Alexandre Fallon.

Mortimer Freiheit of Freiheit Legal Inc. jointly represents the interests of C.K.S.M., the Marciano family trust, along with Stikeman Elliott LLP’sJean C. Fontaine and Pierre-Paul Daunais.

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